Quiz #302 answers

• 1. Automatic stabilisers refer to movements in the fiscal aggregates (spending and taxation), which are sensitive to the cycle in economic activity. In general, the estimates provided by the organisations such as the OECD and IMF of the impact of the automatic stabilisers are biased upwards.

Answer: False

• 2. If there is an external deficit, efforts by the private domestic sector to increase its overall saving as a percentage of GDP, will ensure the government fiscal position is in deficit, irrespective of what the government desires.

Answer: True

• 3. When a government runs a continuous fiscal deficit, public spending builds up over time.

Answer: False